Affordable housing is a crisis in California, particularly for people in groups that have become known as the “missing middle.” These are middle-income households that cannot afford the elevated cost of living in the state. While the missing middle are unable to afford market-rate housing, they are also earning just enough to make them unable to qualify for housing subsidies. Furthermore, renting has also become a challenge, with rents approaching mortgage level prices. This housing crisis for the missing middle is putting our middle working poor at real risk of homelessness.
American Median Income (AMI) – The government uses the American Median Income (AMI) to calculate who qualifies for housing subsidies. People earning 30% or below the AMI receive the greatest share of government support. The missing middle — people earning 80% to 120% of the AMI — typically are excluded from any type of government subsidies.
Who are the Missing Middle? – The missing middle is any typical family, likely a two-income household. They often work in the services industries as secretaries, waitresses, teachers, etc. They are simply finding it more and more difficult to afford housing in California. As an example, to afford a two-bedroom rental, a typical California household would need to work over 80-hours per week at minimum wage without spending more than one-third of their income.
At this point in the discussion, we must tease out income from race. People often wrongly assume that those in the missing middle workforce are only white. This, of course, is not true. Furthermore, there is a significant disadvantage in the African American missing middle. Typically, people of color are far less likely to have the safety net of generational wealth in their family. As a result, when a financial crisis comes along, family assistance may not be an option, which puts them at as much risk as the working poor.
Student debt has exacerbated risks for the African-American missing middle. National statistics show people of color continue to fall short in data points related to income, jobs and housing as compared to whites. While it is positive news that African-Americans are now exceeding national averages related to higher education, the downside is this equates to college debt. Therefore, even though someone may be making “good money,” this debt burden in essence makes them poor.
Potential Solutions – Richmond Neighborhood Housing Services, Inc. (RNHS) has been engaged in the missing middle workforce and housing conversation for years. We strongly believe it is time to disassociate income from race when addressing housing issues. Instead, solutions should be based on a combination of individual and community needs that focus on homeownership.
First and foremost we must stop assuming that households exceeding 100% of the AMI are not at risk. Many individuals paying rent today could indeed afford mortgages, which would help close the wealth gap in our neighborhoods. Government subsidy programs promoting homeownership need to be flexible to include these populations.
Generating more housing through increased construction in the affordable housing segment is another obvious step. In some cities, housing developers are required to make a certain percentage of their units affordable (e.g., 10% to 15%). This “inclusionary zoning” is being studied by other communities in California, like Long Beach. Governments may also look at reducing housing production fees as well as ways to help shorten the development process, like enforceable turnaround times for critical milestones.
Another answer may be allowing people to build more accessory dwelling units (ADUs), which are additional units on a lot where one house already exists. These units, also known as “granny flats” can be built in a backyard, or can even be a converted garage.
Beyond additional construction, laws can be passed to help prevent runaway prices. In 2019, the governor of California signed a law capping annual rent increases to 5% plus inflation.
Richmond Neighborhood Housing Services, Inc. helps residents in Richmond, CA understand and master the “basic” financial habits of budgeting, managing credit, and homeownership. To learn about our FREE services, call us today at (510) 237-6459, visit our website, or reach out to us at info@eastbaynhs.org. Please be sure to follow us on Facebook.
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Sources:
https://nahbnow.com/2019/11/what-is-the-missing-middle-of-housing/
https://longbeachmc.org/missing-middle-being-squeezed-out-of-housing/
https://lesardevelopment.com/housing-pilot-focuses-on-missing-middle/